Technorati is in trouble financially, and its planned way out is to cut costs and skimp on counting blog ranking, the one unique thing about it - as VentureBeat reports:
Basically, the company is going to reduce the costs of indexing the blogosphere and reporting the results on its Technorati.com site, which is a major blog search engine. It is not going to index the blogosphere just for the sake of saying it can do so. It is also going to put more emphasis into its business which pays the bills: the Technorati Media ad network, which serves ads to more than 400 sites, not just Technorati.com
“We were spending way too much money,” said Richard Jalichandra, who became chief executive of the San Francisco company in 2007 (see his guest post). “This is a turnaround situation. The company had business, but it was in a small amount of trouble. The company was conceived for a different kind of Internet. Now, besides blogs, there is Twitter, social networking, and the real-time web.”
We saw this on Broadstuff: in August - September our Technorati "authority" halved, and our ranking dropped like a stone. The rate of linking to this blog hasn't changed, our traffic growth is still fairly steady (its cyclical over the summer holidays, but not
that cyclical) and Google pagerank hasn't dropped.
In short, everything else is by and large the same, but Technorati metrics nearly halves us. So, we are not happy shoppers. Technorati says it will will in essence log less of the history, so the results will be more up to the minute, and thus more volatile. The difference today is that there are lots of other metrics we can use instead to steer the good ship Broadstuff.
OK, we say - this system is borked, and - being busy souls - we increasingly ignore it. Technorati is shifting its business model, and we are shifting our attention.
It is also looking to define authority in the Twittersphere, though its metric is pretty dodgy as all it is doing is taking what it thinks are the top 100 bloggers as the most important Twitterers. As a measure it is wildly inaccurate (it looks like a nice comfortable Blog A-Lister c 2006 list), so pretty useless to any potential Twadvertiser. Besides, as yet there certainly is no money in Twitter metrics, and its relatively easy to do - we do it (in a more sophisticated way, let me add), and loads of other people do it better too. Good news here for Technorati is its very early days so a small effort should yield a much better result.
But our mutual drifting apart apart, I have a lot of sympathy with Da Management (and you really should read Richard Jalichandra's post I linked to above for describing how to navigate choppy waters). What do you do when the world changes and you are having to run a business that's now on the wrong tack, is the wrong design and out of its depth. VC's are no longer lining up to hand over cash, and the bank manager is tut-tutting over lack of profit and the declining Ads market. Oh, and there is a 70 year cycle recession on.
Clearly, reducing cost is essential, but you can't cost-cut yourself to business success. you need to increase revenues too. Its new model is Ad-server serving:
For the past five quarters, the Technorati Media ad network has become the company’s mainstay money maker. Technorati Media is a matchmaker, connecting advertisers to the audiences of 400 major blogs with 108 million readers and 1.5 billion pages of content. Included among them are sites such as Inquisitr.com. That network makes Technorati into the sixth largest social media property, and advertisers want to reach its audience
So will its new strategy work? All of this is a perfectly good business model, but you don't need Technorati to find the top 500 or so blogs, that is a fairly trivial exercise - so its hard to see what their competitive advantage is in the medium term, as I suspect that others will also target the Top 500 and compete for their eyeballs, reducing margins. What it has got is the fact that it has actually assembled the Ad network, and that has value as any other player would have to spend similar to replicate it.
I thus suspect they are trying to get it to as good a financial position as possible in order to sell the company, build up its "buzz" in the Twittersphere as a potential future growth story. and in parallel try and get a line of credit to keep going until good Ad-times return and values go up - thats what I would be doing, anyway.
